The Dollar found some tentative support against the Euro yesterday, firming a surprising 0.4% by the close last night after falling to a new 20-month low earlier in the session. There was a host of significant economic data released in the States yesterday as a report on U.S GDP showed that the economy expanded at a revised 2.2% year-on-year in the three months through to September. Although U.S growth is still under the 2.6% seen in the second quarter, the revised estimate in the third was significantly higher than the 1.8% forecast in October and supports the Fed’s view that the U.S economy will continue to expand at a moderate rate. Elsewhere, the Dollar came under increased pressure against the Pound, falling to the lowest level since September 1992 overnight to trade above the resistance level around 1.9548.
A separate report on the U.S housing market showed that the sales of new homes fell by more than expected in October, which will only fuel speculation that the housing slump is still gathering momentum. Even the chairman of the Federal Reserve, Ben Bernanke, couldn’t halt the Dollar’s rapid decline against Sterling as the market ignored his comments over the prospect of higher interest rates as he stated in New York that U.S inflation still remained at an “uncomfortably high” level. In terms of economic data, the Dollar may come under further pressure this afternoon with the release of the Fed’s preferred measure of U.S inflation as the report on personal income and expenditure is widely expected to remain unchanged in October, while the Core PCE Deflator may fall from 0.2% to 0.1%.
The Euro continued to slide against the Pound yesterday amid a distinct lack of economic data released in the Euro-zone. The single currency failed to make any gains despite comments from ECB policy makers including the chairman Jean-Claude Trichet, who seem unconcerned with the Euro’s recent strength and the potentially damaging effect on European exports. There is a host of economic data released this morning as German unemployment fell in November and it seems likely that Europe’s largest economy will be able to supplement the introduction of the 3 percentage point tax increase at the start of next year. The Euro may make further gains against the Dollar this morning following the release of the revised estimate for European economic growth in the third quarter, which is widely expected to remain unchanged at 2.6% despite a series of rate hikes this year. Elsewhere, the Flash estimate of consumer price inflation may show an increase from 1.6% to 1.8% in November, which suggests that the ECB will need to continue raising interest rates.
Data Released 30th November
UK 10:30 Consumer Confidence (November) UK 11:00 CBI Distributive Trades Balance (November)
EU 10:00 Flash Consumer Price Inflation (November) EU 10:00 GDP (Q3 Revised) EU 10:00 EC Sentiment Index (November) – Industrial / Consumer Confidence
U.S 13:30 Initial Jobless Claims (w/e 25th November) U.S 13:30 Personal Income / Expenditure (October) – Core PCE Deflator U.S 15:00 Chicago PMI (November)
The positive sentiment surrounding the Euro continued yesterday as the single currency rose to a fresh 20-month high against the Dollar despite comments from the French Finance Ministry expressing concerns that the recent strength of the Euro could hamper economic growth. The single currency found support from the M3 data, which showed that money supply into the Euro-zone grew at an annual rate of 8.5% in October, well above the ECB’s 4.5% target. The 3-month moving average is the Central Bank’s preferred measure of Euro-zone inflation and with money supply increasing at such an alarming rate, it seems likely that the ECB will continue raising interest rates next month and beyond into 2007.
The Pound continued to make gains against the majors yesterday, firming to a fresh two-year high against the Dollar and overnight we have tested the major resistance level just under 1.9550 and if broken, we will be trading at the highest level in 14-years. In addition, Sterling made unexpected gains against the Euro, rising 0.4% on the session following comments from the Chancellor of the Exchequer, Gordon Brown, who reiterated that economic growth would exceed forecasts this year. Elsewhere, a separate report on the UK housing market showed that house prices had increased at the fastest annual rate in 17-months in October despite the Bank of England’s decision to lift UK interest rates to 5.0% this year. The focus this morning in terms of economic data will be the release of UK mortgage approvals for the month of October and although the data is expected to show a modest drop from the previous month, the figure will not be indicative of growth in the housing sector.
The Dollar continued to struggle yesterday following a report on U.S durable goods, which showed that orders had declined in October by the most in over six-years as companies become cautious over spending in the face of slowing economic growth. Orders fell 8.3% following a rise of 8.7% in September and a decrease in corporate investment could potentially hamper economic growth going into 2007. In addition, the Dollar came under further pressure as a separate report showed that U.S consumer confidence unexpectedly declined in November despite the sustained drop in fuel prices since mid-July. The index of consumer sentiment dropped to a reading of 102.9 from a revised 105.1 in October and it seems consumer spending will be insufficient in propelling economic expansion following the slowest growth in 3-years. There is some hugely significant data released in the States this afternoon as the revised estimate for U.S Gross Domestic Product is widely expected to remain unchanged at 1.8% in the third quarter.
Data Released 29th November
UK 09:30 BoE Mortgage Approvals (October) UK 09:30 Consumer Credit (October)
U.S 13:30 GDP / Deflator (Revised Q3) U.S 15:00 New Home Sales (October) U.S 19:00 Fed Beige Book
The Pound rose for the eighth day in succession against the Dollar yesterday despite a distinct lack of economic data released in Europe or the States and that trend looks set to continue this morning as Sterling advances to fresh two-year high at 1.9440 following a particularly hawkish rhetoric from the Chancellor of the Exchequer. During a parliamentary debate in the House of Commons, Gordon Brown reiterated that UK economic growth will exceed the government’s initial forecast this year to accelerate towards 2.5% by March 2007. The sustained growth in the UK economy will only fuel speculation that the Bank of England will have the scope to continue raising interest rates next year with the market currently pricing in a possible rise in February.
The Euro held firm against the majors yesterday despite concerns from several Euro-zone finance ministers regarding the recent strength of the single currency. Thierry Breton, the French Finance Minister, reiterated that it was important to be “highly vigilant” on the Dollar’s recent decline while others urged the ECB to monitor the pace of economic growth as rigidly as they consider inflation. The Euro received a boost this morning as German consumer confidence rose to a five-year high this month as the impending value-added tax increase encouraged consumers to carry on spending before its introduction next year. There is some significant economic data released this morning as the ECB continues to monitor the M3 money supply into the Euro-zone and the consensus forecast is for a rise from 8.5% to 8.9% in the figures for October.
The Dollar continued to tumble against the majors yesterday, falling to a fresh two-year low against the Pound and a further 20-month low versus the Euro as the hangover from the Thanksgiving Holiday continued to weigh on Dollar sentiment. There is a mass of economic data released in the States this afternoon with the focus falling on existing home sales for the month of October and the report is expected to show further drop in the U.S housing market. Sales of previously owned homes may decline for the seventh month in succession last month as higher interest rates continues to weigh on demand. Elsewhere, the Dollar may come under further pressure as orders for durable goods is expected to drop by 4.0% last month while U.S consumer confidence may increase following the sustained drop in fuel prices over the same period.
Data Released 28th November
EU 09:00 M3 / 3 Month Moving Average (October) EU 10:00 OECD Presents Economic Outlook
Following on from last week, the Pound continued to make gains against the beleaguered Dollar after trading at the highest point in two years above 1.9300 following a slightly better than expected report on UK GDP in the third quarter. Economic growth expanded 0.7% in the revised estimate, which was largely in line with previous figures and the report will only fuel speculation that the UK economy will be able to sustain a further rise in UK interest rates. The focus this week in terms of economic data will be UK mortgage approvals for the month of October and the consensus forecast is for a marginal drop from September, although this is not indicative of any downward momentum in the UK house market.
The Euro also made significant gains against the Dollar last week, climbing to the highest level since March 2005 and remained firm against Sterling despite a host of negative economic reports from Germany. Although hawkish comments from several ECB officials have helped encourage the possibility of a further rise in Euro-zone interest rates in 2007. The single currency may also receive a further boost this week with a host of economic reports expected to show faster inflation, swelling money supply and a rebound in business confidence, which will only fuel speculation that interest rates in Europe will rise faster than in the States.
The Dollar came under intense pressure against the majors last week following a particularly damaging report from the Council of Economic Advisors, which showed a dramatic cut in U.S growth forecasts this year as the sustained decline of the housing market continues to weigh heavily on economic expansion. As a result of the downward revisions, the Dollar declined as speculation intensifies that the Federal Reserve will begin cutting U.S interest rates next year in the face of slowing growth and moderating inflationary pressures. In addition, a worse-than-expected report on initial jobless claims has gave way to speculation that the U.S unemployment rate is set to jump to 4.6% in the monthly job report released next week. There is a plethora of significant economic data released this week as trading gets back to normal following the Thanksgiving holiday with the focus falling on U.S consumer confidence, the core PCE deflator and the ISM index for manufacturing.
The Dollar declined heavily against the majors yesterday, falling 0.8% versus the Pound as we approach the yearly high towards 1.9175 and a further 0.7% against the Euro to trade near a six month low. The Dollar sell-off can be attributed to a number of reasons, not least the rumours that investors were considering unwinding U.S carry trades in the build-up to the Thanksgiving holiday. In addition, a surprisingly negative report from the Council of Economic Advisors showed a dramatic cut in U.S growth forecasts this year with the CEA blaming the housing slump for its revisions. As a result, the Dollar came under increased pressure against the majors as speculation intensifies that the Federal Reserve will begin cutting interest rates in the first quarter of 2007 to supplement slower economic growth and reduced inflation pressures. In terms of economic data the Dollar continued to tumble against Sterling as the weekly jobless report showed an unexpected rise in the number of new claims. With speculation building that the U.S unemployment rate is set to jump from 4.4% to 4.6%, we can expect the Dollar to struggle in the build up to the Nonfarm payrolls figures early next month.
The Euro advanced against the Dollar yesterday following a hawkish rhetoric from the Primeminister of Luxembourg, Jean Claude Juncker, who stated that the European Central Bank should keep its political independence and discarded recent concerns from Jacques Chirac over rising interest rates and the strength of the Euro. The single currency has also held firm against the Pound this morning despite a worse-than-expected report on German economic growth, which showed that Europe’s largest economy had slowed in the third quarter, primarily due to a slowdown in construction spending. German GDP, the value of all goods and services, rose 0.6% from the second quarter following the fastest growth since 2000 but it seems the report will do little to stop the ECB from raising Euro-zone interest rates early next month. However, the Euro may come under some pressure later today as German business confidence is expected to decline in November on concerns that rising interest rates and the highest sales tax increase since the Second World War will weigh heavily on economic expansion next year.
The Pound made significant gains against the Dollar yesterday and held firm against the Euro following the release of the minutes from the Bank of England’s last policy meeting where the MPC elected to lift UK interest rates for the second time this year. The committee voted 7-2 in favour of a rise in rates with David Blanchflower and Rachel Lomax deciding to keep borrowing costs unchanged, expressing downside risks to demand and inflation. Policy makers elected to lift the benchmark interest rate to 5.0% on concerns that wage growth would keep inflation above the government’s 2.0% target. However, the minutes didn’t give away too many clues with regards future monetary policy and it seems that the BoE will adopt a ‘wait and see’ policy over the coming months and if the projected rise in wage growth doesn’t occur then rates may stay at 5.0% for some time.
Data Released 23rd November
EU 09:00 Current Account Balance (September)
GER 09:00 Ifo Business Confidence Index (November)
The Pound found further support against the majors yesterday, firming an additional 0.1% against both the Euro and the Dollar as we break back above 1.9000. The Confederation of British Industry released their monthly industrial trends survey yesterday, which unexpectedly showed a pick-up in the sector for November following last month’s weakness. The report showed that demand for British made goods was still high despite the Pound’s strength over the past quarter and gave way to suggestions that the Bank of England may continue monetary tightening in 2007. The focus this week in terms of economic data will be the minutes from the BoE’s last policy meeting released this morning. The MPC elected to lift UK interest rates for the second time this year in November and it will be interesting to gauge just how the 8-strong committee voted and the language and tone of the report may also provide some insights into future policy.
The Euro managed to hold firm against the Dollar yesterday despite a damaging report on French gross domestic product, which showed that the economy failed to expand in the third quarter following the fastest growth in nearly six years at the beginning of 2006. However, the Euro has received a modest boost this morning as a separate report on French consumer spending showed an unexpected rise in October after unemployment fell to a five-year low. In addition, Euro-zone industrial orders, due for release later this morning, are expected to fall lower as demand from the U.S dwindles in the face of slowing economic growth.
With the Thanksgiving holidays dominating the American calendar this week, there has been a distinct lack of economic data to drive the Dollar. However, a report this afternoon on U.S consumer confidence is expected to remain at an elevated level in the month of November after achieving a 15-month high in October. In recent months, significantly lower petrol prices and a strong labour market has helped supplement the dramatic slump in housing this year as the Federal Reserve raised U.S interest rates seventeen times over a 2-year campaign. The University of Michigan’s final index of consumer sentiment is widely anticipated to show a modest decline towards a reading of 93.3 in November. While elsewhere, a separate report on initial jobless claims is expected to show that the number of Americans filing for benefits remained largely unchanged in the last week.
The Pound advanced against the majors yesterday, firming 0.1% against both the Euro and the Dollar following a distinct lack of fundamental data released in the States and in Europe. The Rightmove index showed that UK house prices accelerated to the fastest annual pace for 2-years in November but it is widely anticipated that prices may of peaked following the Bank of England’s decision to lift interest rates by a half a percentage point since August. In addition, a separate report on M4 Lending showed that UK money supply remained close to the 16-year high in October.
The Pound made gains in the aftermath of the figure as the continued strength in money supply supported the view that UK interest rates could potentially rise once more in this tightening cycle. The Pound may find further support this morning following a report from the Confederation of British Industry into the state of the UK manufacturing and the survey should provide some insights into the industrial sector over the past month.
The Euro made modest gains against the Dollar yesterday despite the lack of economic reports coming out of the Euro-zone. However, the chairman of the European Central Bank, Jean-Claude Trichet, reiterated his hawkish stance with regards monetary policy as he stressed that his institution remained “strongly vigilant” in assessing inflation risks, a term we have become all to familiar with in recent months as a signal that Euro-zone interest rates are set to rise once more the following month. However, there has already been some significant data released this morning as a report on French GDP showed that the economy failed to grow in the third quarter following the fastest economic expansion in almost six years in the previous three months. Data Released 21st November
Following a barrage of significant economic reports released last week, we can expect a relatively quiet week in terms of data with the focus falling on the minutes from the Bank of England’s last policy meeting where the MPC elected to raise UK interest rates to 5.0%. The language and tone of the minutes will prove significant in determining the outlook for future monetary policy but the Pound may come under further pressure if the eight-strong committee were divided in the decision to raise rates by a quarter-point earlier this month. Over the past week the Pound has continued to deteriorate against the majors as weak inflation numbers diminished the prospect of any further monetary tightening this year. The Pound has received a timely boost this morning following a report on the UK housing market as prices rose at the fastest annual pace in two years for the month of November.
The positive sentiment surrounding the Euro has gathered momentum in recent weeks and that trend looks set to continue amid a sparse supply of European economic reports released this week. The German Ifo index into business confidence is widely expected to remain at a relatively low level despite the obvious improvement in economic growth this year, which has accelerated at the fastest pace since 2000. Concerns and uncertainty surrounding the planned VAT increase at the start of next year will also have an impact on German retail sales, which is expected to bounce back in October as consumer’s flock to the highstreet to avoid paying a higher tax percentage.
With the Thanksgiving holiday dominating the American calendar this week, the Dollar may be left exposed amid a sparse supply of significant economic events with the focus falling on the final estimate of the Michigan sentiment survey for November. The index is widely expected to show a modest increase from the previous month as consumer spending continues to show signs of a revival as we approach the festive period.
Data Released 20th November
UK 09:30 M4 Sterling Lending (October) UK 09:30 PSNCR (October)
The Pound came under renewed pressure yesterday, dropping 0.5% against the Dollar from an 18-month high earlier in the session and a further 0.1% versus the Euro following a band of weak economic reports. UK factory-gate inflation accelerated at the slowest annual pace in over two years for the month of October as energy prices continue to decline. Producer output prices climbed just 1.7% year-on-year last month, which is the lowest since March 2004 and well under market expectations. As a result, the Pound declined against the majors and therefore the release of the UK consumer price index this morning will take on added impetus as inflation is predicted to rise to 2.6% year-on-year in October, which is way in excess of the government’s 2.0% target and may result in fresh calls for a further tightening of UK interest rates.
The Euro continued to make gains against the majors yesterday, firming an additional 0.3% against the Dollar to trade at a 10-week high despite the apparent lack of any fundamental data. However, the single currency may come under some pressure this morning as European economic growth probably slowed in the preliminary estimate for the third quarter following the fastest growth in 6-years earlier in the year. The slowdown in economic expansion can be attributed to a variety of factors including higher interest rates, the planned value-added tax increase in Germany and the sharp downturn of growth in France over the last quarter. Elsewhere, the Euro may come under further pressure as German economic growth slowed by more than forecast in the third quarter while the ZEW survey may show a further drop in investor confidence this month.
Initially, the Dollar declined against the major currencies yesterday and we may see further losses this afternoon amid a plethora of significant economic reports with U.S retail sales expected to fall for a second month in succession in October following the sustained drop in fuel prices over the same period. Sales may slip 0.4% from September while a separate report on U.S producer price inflation may also show a second consecutive decline, the first back-to-back decrease since June 2004. Producer prices is expected to show a further 0.5% drop in prices for the month of October, which only emphasises moderating inflationary pressures in the States, which in turn leads to increased speculation that the next move for the Fed will be a cut in U.S interest rates. However, the focus today in terms of economic reports will be the minutes from the last FOMC rate announcement where policy makers elected to hold rates at 5.25% and it will be interesting to see if the report provides an insight into future monetary policy.
Data Released 14th November
UK 09:30 Consumer Price Index (October)
EU 10:00 Flash GDP (Q3)
GER 10:00 ZEW Expectations Balance (November)
U.S 13:30 Retail Sales (October) U.S 13:30 Business Inventories (September) U.S 13:30 Producer Price Index (October) U.S 19:00 FOMC Minutes 24th October Meeting
The Pound advanced to the highest level this year against the Dollar last week following a combination of weak U.S economic data and the Bank of England’s decision to lift UK interest rates to 5.0% in an attempt to rein in inflation and maintain price stability. There is a plethora of significant data released this week in both the States and in Europe, which should provide some direction with regards future monetary policy. The focus will fall on the BoE quarterly inflation report on Wednesday, which is expected to give an insight into the outlook for UK interest rates and it will be interesting to see whether the scale of monetary tightening since August has been sufficient to keep inflationary pressures relatively under control. The recent positive sentiment surrounding the Pound may continue with the data released this morning as the monthly producer price index is expected to show modest growth in output prices for the month of October with the annual rate rising to 1.9%.
The Euro made some gains against Sterling last week after the BoE left the outlook for UK interest rates unclear coming into year-end while the market was hoping for a good indication of further monetary tightening in the first quarter of 2007. In addition, a number of ECB board members and policy makers have publicly called for a more aggressive stance towards a further rise in Euro-zone interest rates after the chairman, Jean-Claude Trichet gave a strong indication that rates are set to rise for the fifth time this year in the first week of December. In terms of economic data, the Euro may come under pressure from a report on the headline measure of European inflation, which is expected to remain unchanged at 1.6% while the core estimate may drop to 1.4%, which is still well under the Central Bank’s 2.0% target suggests that growth in the economy may begin to moderate.
The Dollar declined against the majors last week, falling to two-month low against the Euro despite a host of positive economic reports as the shortfall in trade actually narrowed by more than anticipated in September and U.S consumer confidence remained close to the highest level in 15 months. Nevertheless, the Dollar continued to come under increased pressure as the political tension surrounding the U.S mid-term elections culminated in the Democrats clinching majority seats in both houses for the first time since 1994. There is a packed calendar of U.S data released this week including the minutes from the Federal Reserve’s last interest announcement where policy makers elected to hold rates at 5.25%. Elsewhere, the Dollar may continue to struggle amid a mass of economic reports with the focus largely falling on U.S retail sales, which is expected to ease a further 0.3% while elsewhere, U.S consumer price inflation is expected to remain relatively unchanged at 2.9% excluding the volatile food and energy. Data Released 13th Nov
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